VII. Assignment of Proceeding

Michael R. Peevey is the Assigned Commissioner and Dorothy J. Duda is the assigned Administrative Law Judge in this proceeding.

Findings of Fact

1. In D.03-03-033, the Commission set interim rates for a subset of Verizon's UNEs, using UNE rates recently adopted for Verizon's operations in New Jersey as a starting point and adjusting these rates based on the FCC's Synthesis Model.

2. On May 7, 2004, the New Jersey Board adjusted UNE rates for Verizon New Jersey to modify the cost of capital and to correct a cost allocation error involving switching.

3. Verizon's petition was filed more than one year following D.03-03-033 because the New Jersey Board adjusted Verizon New Jersey UNE rates in May 2004.

4. Verizon proposes a 9% shared and common cost markup in the permanent phase of this proceeding, compared to a 10% markup adopted for Verizon New Jersey.

5. The 21% markup included in SBC California rates has been remanded to the Commission for further review.

Conclusions of Law

1. It is reasonable to adjust Verizon's interim UNE rates based on adjustments to New Jersey rates because the changes are not unduly burdensome to calculate or implement.

2. For interim ratesetting purposes, it is reasonable to rely on recent overhead calculations incorporated into Verizon New Jersey rates rather than the 22% markup originally adopted in 1997.

3. Verizon's petition for modification of D.03-03-033 should be granted.

4. The rates set forth in Appendices A, B, and C of this order should replace the rates in Appendices A, B, and C. of D.03-03-033.

ORDER

IT IS ORDERED that:

1. The May 21, 2004 petition of Verizon California Inc. (Verizon) to modify Decision (D.) 03-03-033 is granted.

2. Appendices A, B, and C of this order should replace Appendices A, B, and C in D.03-03-033.

3. The petition for modification filed by AT&T Communications of California and MCI, Inc. on December 10, 2004 is denied as moot.

This order is effective today.

Dated January 27, 2005, at San Francisco, California.

MICHAEL R. PEEVEY

President

GEOFFREY F. BROWN

DIAN M. GRUENEICH

Commissioners

I dissent.

/s/ SUSAN P. KENNEDY

Commissioner